Myanmar Opens Its Doors

February 1, 1996byRobert Weldon

With the release of Myanmar’s most famous dissident, Nobel Laureate Aung San Suu Kyi, last summer after six years of house arrest, the ruling military junta sent its strongest signal yet that the country is ready to open its doors to the world. Here’s what this means for Myanmar’s legendary gem mining industry

“About your trip to Myanmar,” a voice at the other end says urgently. “Don’t go. There’s a rumor the junta will release ‘The Lady’ on the sixth anniversary of her captivity. That’s when you’re going, isn’t it? It could be dangerous. It’s not a good time for foreigners – especially reporters. Please don’t go.”

Click.

So much for sleep. My trip has been carefully planned for months; how could I suddenly trash it? I think carefully. I decide on a compromise, scooting into Myanmar a bit ahead of plans.

It has been 70 years since superb gemstones were available regularly or dependably from Myanmar, the Southeast Asian country that was called Burma until 1966 – and still is by many outsiders.

Some of these gems have reached the market over the years, thanks to short-lived openings of the mining sectors and smuggling through neighboring Thailand and China. But now Myanmar officials have pledged to “open up” the country and have passed laws governing foreign investment, trade and development of the mining sector. “We have so many resources here, and we want to make the market here to avoid gems leaving the country [by smuggling],” says U. Hlaing Win, deputy minister of the Ministry of Mines, Myanma Gems Enterprise. “We want to privatize the gem market in the future so everyone can buy and sell freely.”

Three decades of political isolation have not left Myanmar in the best of conditions. Roads, hospitals, airlines, electricity and sewage systems are woefully inadequate. Even the main indoor market in Yangon (formerly Rangoon) is subject to daily electrical blackouts. And the gem-rich Shan State lies within the “golden triangle,” where drug lords and bandits control gems, minerals and forestry.

According to the few who have visited the interior reaches of the country, this is still an unruly, dangerous land where it’s best to travel with limited cash. But the SLORC (State Law and Order Restoration Council) government seems to have put its heart into modernizing the country. Contracts for hydroelectric power, telecommunications and road-building have been granted to several foreign companies. In Yangon and Mandalay, world-class hotels are springing up, old buildings are being restored and roads are being paved.

The government also has stepped up its fight with insurgencies in the east and developed a somewhat understated campaign slogan: “Visit Myanmar in 1996.”

For gem dealers, new opportunities are forming in jewelry markets and gem auctions in Yangon. Other markets are developing rapidly in Mandalay and mining towns such as Taunggyi (pronounced TOWN¥gee) and Mogok. For U.S. manufacturers and retailers, the changes will translate into a wider selection of magnificent gemstones that originate in the enchanted, mysterious land of Myanmar.

Historic gem role: The first written mention of gems in what is now Myanmar came in the 1600s from Jean Baptiste Tavernier, a French traveler and jeweler. After traveling through India, he described the location where he found a ruby as “in a mountain twelve days or thereabouts from Siren in a northeast direction at a place called Capelan.”

Edwin Streeter, a British jeweler and historian who is familiar with Burma, speculated the name “Capelan” derived from Kyat-Pyin – a ruby and spinel producing region in Burma. While Tavernier was the first to write about gems in the region, mining and trading had begun there almost two centuries earlier. By the late 1500s, a succession of Burmese kings had taken control of the ruby mines, rarely allowing outsiders in.

The kings enacted strict rules. For example, King Thibaw, the last of the kings of Upper Burma before it was annexed by the British in 1886, decreed that any stone over a certain size be handed over to the monarchy. To avoid that rule, many large, top-quality ruby crystals were broken up.

Under British rule, new laws were passed dealing with licensing, leasing and regulation of mining areas. The Burma Ruby Mines Co. opened in Mogok in 1889 and until 1925 provided the world with some of the very best gemstones known today. While most discussions about Myanmar’s gems center on ruby and jade, the country actually produces a multitude of fabulous stones, including chrome tourmaline, danburite, topaz, zircon, peridot, moonstone and spinel. Dealers say Myanmar is also the source of collector gems, including painite, the rarest mineral in the world (only three specimens are known to exist).

Myanmar also is the main commercial source of jade and the only source of the extremely rare “imperial” jadeite. The colors range from green, white, yellow and orange to lavender, purple, brown and black. But jadeite sales slowed 30 years ago as Myanmar closed its doors more tightly. Supplies dwindled faster than with other gemstones because jadeite rough often is too big and heavy to smuggle across borders.

A new day: Myanmar’s recent effort to open itself to the world coincides with one of the most significant discoveries of ruby and sapphire ever, made in Mong Hsu in northeastern Shan State in 1992. These stones can’t compare with Mogok Stone Tract’s finest, but they are nevertheless beautiful – and abundant. Furthermore, the gems respond easily and predictably to heat treatment to improve color and remove their characteristic bluish core.

No Westerner is known to have been to Mong Hsu because the area lies in disputed territory and is fairly inaccessible. A more accessible market for the rubies has developed in nearby Taunggyi. The village has become a virtual boomtown, with a marketplace teeming with ethnic diversity and communication in many languages. “It reminds me of the Bible’s Tower of Babel,” says Yianni Melas, a gem consultant with Swarovski (see related story).

Because so many gems are smuggled through market towns such as Taunggyi, the government has enacted strict controls on Mong Hsu mining and tried to shift all gem markets toward Yangon, which is more accessible to foreigners. A new market, Pinlon Yadana, opened in Yangon in March 1995. The new market’s success will depend on how well the authorities can control smugglers at the border with Thailand and how much the Mong Hsu miners will cooperate, says U. Hla Win, owner of Golden Owl Jewellery and Gem Laboratory in Yangon. Interestingly, of the new market’s 363 shops, 210 were sold to Mong Hsu miners.

Though customer traffic is light, the shops are well-staffed by concessionaires who courteously try to coax passersby to come in and see their magnificent ruby, jade or spinel necklaces. Yangon’s leaders recognize this as a great opportunity for western buyers and hope foreigners will soon flock to the market.

Sweeping changes: Much of the optimism inside and outside of Myanmar is linked to a change in the political atmosphere that led to the release of Nobel Laureate Aung San Suu Kyi last year after six years of house arrest. In addition, Myanmar’s business community is optimistic about the government’s new mining and foreign investment laws and the prospect that export taxes may soon drop from 15% to 10%.

Outside buyers, particularly from Thailand and the U.S., feel the new laws will have a critical impact on Myanmar’s gem industry. The new laws provide more investor security through well-defined permit applications, duties, utilization rights and penalties. However, Myanmar still holds tenaciously to the notion that all minerals belong to the state. All mining is done on a joint-venture basis with Myanmar’s Ministry of Mines.

Currently, locals enter into joint ventures with the government on an auction basis. Some have paid up to US$180,000 for a spot on ruby-bearing land. While foreign investors are encouraged to participate in gem-cutting and jewelry-making ventures, none has been granted a license yet to participate in mining ventures. This poses a problem for Myanmar’s gem-mining potential, which would benefit greatly from foreign investment in more sophisticated equipment and technology. The government recognizes the problem and wants to solve it. “More privatization will come in the next two to three years,’ says Deputy Minister U. Hlaing Win. “We want to make Myanmar a real producing center and Yangon a real buying market.”

Outgrowth of new policies: One showpiece for Myanmar’s new policy is a joint venture with VES Group Ltd. of Thailand. It produces high-quality jewelry for export using local workers and local gemstones, all under Thai supervision.

Another showpiece is the new Ministry of Mines Gem Museum, which documents Myanmar’s incredible gem and mineral wealth. The museum’s gems – collected over 30 years – are displayed in handcarved teak cases on silk panels. Myanmar pearls show classic gradations of quality, color and size. Jade is well-represented with beautiful imperial and other commercial color varieties. Rubies, sapphires and other gems of astounding qualities also have a home in the museum.

The government itself invested in the gem industry through Myanma Gem Enterprise, a department that oversees Myanmar’s gem and jewelry industry. Its influence includes the mining sector, cutting and polishing of gems, processing and manufacturing of jewelry, and the Myanma Gems, Jade and Pearl Emporium, an auction facility at the Ministry of Mines headquarters in Yangon.

Now a joint venture with domestic miners, the auction has been held annually (and recently semiannually) since 1964. For a fee, dealers are allowed to submit goods for sale, thereby exposing them to foreign buyers who come by invitation only. But the auctions impose difficult-to-meet duties (up to 25%) on miners and producers, often forcing them to look for more lucrative outlets – such as smuggling.

The auctions, held each February, account for a significant portion of Myanmar’s gem and jewelry sales, which the U.S. National Trade Data Bank estimated at $29.1 million in the fiscal year ended March 31, 1995. Critics say that figure could be even higher if Myanmar would adopt foreign investment and liberalization policies similar to those of Sri Lanka and India.

The future: Overall, Myanmar’s outlook is encouraging. The government is trying to further liberalize its policies and grant citizens certain economic freedoms. This would help to make foreigners more confident about investing in Myanmar. (Actually, foreign investment in Myanmar has doubled in recent years, though very little of it came from the U.S.)

In the gem industry specifically, the government still needs to curb smuggling and create an atmosphere that is comfortable and affordable to do business.

Myanmar seems to be headed in this direction and may soon offer the world a treasure trove of gems that are, in so many cases, second to none.

The flight from Bangkok to Yangon is quite brief. A mere accent to what has been several days of fretting. So many people have told me to be careful. Careful what I say. Careful what I ask. Careful about taxis. Careful about the water. Trepidation has settled in my bones.

Matters are not made any better when I find myself traveling next to China’s minister of defense and his entourage during his historic first trip to Yangon. Aah, but his presence does allow us a red-carpet, band-playing arrival at the Yangon airport. By the time the rest of us disembark, the minister has gone, along with the carpet and the band. Once out of Customs, it seems most of Yangon has come to welcome me after all. Smiling faces, welcoming pats on the back, loud greetings in Burmese and English cheer me as I leave the building. Wrong again. These are baggage handlers angling for a chance to heave the suitcase.

Finally, I get my first glimpse of Yangon. A spotless tree-lined highway meanders from the airport to the town. I catch glimpses of bicycle taxi drivers straining with their customer loads. The Shwedagon Pagoda, Yangon’s holy Buddhist temple, appears suddenly. Its massive jewel-encrusted spire shimmers against a backdrop of darkening clouds. Around it huge dragonflies hover, enjoying the calm air before the afternoon rain.